With almost $1 billion in funding and ambitions to replace petroleum-based cars with a network of cheap electrics, Shai Agassi’s Better Place was remarkable even by the standards of world-changing startups. So was its epic failure. A 21st-century cautionary tale.

“So this is the car.” I’m standing outside a shopping mall somewhere in Tel Aviv, Israel, as Guy Pross shows me his ride.

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THE CAR: The Renault Fluence Z.E. was the only vehicle to work with Better Place’s electric car infrastructure.Getty Images

The silver Renault sedan has four doors, five seats, and a body design that makes it look a bit like a fat Honda Civic. Under the hood, though, the normal 1.6-liter internal-­combustion engine has been replaced with a compact 70-kilowatt electric motor, a conversion overseen by Renault and a ­local company named Better Place. Instead of a gas tank, an enormous lithium-ion battery pack lives between the trunk and the back seat. Inside the vehicle, Pross directs my attention to the coup de grace: the center console, where, in addition to all the familiar interior features of a mid-range car–the ugly radio, the climate-control dials–there’s a little joystick with some strange-­looking buttons. “This is where the cup holder used to be,” he says, referring to the standard version of the Renault. In its place, Pross twirls a dial that Better Place installed to control a futuristic navigation system ­called Oscar (OS plus car–get it?), which was designed to help drivers find charge spots and predict whether or not they had enough energy to complete their journey. “It’s really slick,” he says.

He hands me the keys, I stick them in the ignition, and twist. There’s a beep, the air-conditioning fans start to hum, and then… nothing.

“Is it on?” I ask.

Pross nods, grinning. I hit the pedal and the car jumps forward, emitting a high-pitched whir. We scoot out of the parking lot and I begin weaving, only slightly recklessly, through Tel Aviv’s notorious traffic. I’m filled with that sense of energy and possibility that one sometimes feels when driving a fast car. “It’s not a Tesla,” says Pross, referring to Elon Musk’s company. “But it’s close. And it costs a lot less.”

The range on the Better Place car’s battery is only 80 miles or so, but the company created a charging infrastructure here in Israel that included hundreds of public electrical outlets. In addition, robots were installed at dozens of service stations that could extract the used battery from underneath the car and replace it with a fresh one in about five minutes. The idea was to put an end to so-called range anxiety, which has long been offered as an explanation for why electric cars have failed to catch on with consumers. With the Better Place network, a driver could easily navigate from, say, Tel Aviv to the resort town of Eilat, a little over 200 miles away, with only 15 minutes or so in stops.

“The technology worked, customers were satisfied,” says Pross, who in addition to being this particular car’s owner was a Better Place employee from 2008 until the bitter end, the company’s bankruptcy declaration in May 2013. He sounds heartbroken. “It would have been a revolution.”

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Better Place was born to be revolutionary, the epitome of the kind of world-changing ambition that routinely gets celebrated. Founder Shai Agassi, a serial entrepreneur turned rising star at German software giant SAP, conceived Better Place “on a Davos afternoon” in 2005 when he asked himself, “How would you run a whole country without oil?” Four years later, onstage at the TED conference, Agassi, a proud Israeli with a bit of a Steve Jobs complex, wore a black turtleneck and promised, with the confidence of a man who has known the future for some time but has only recently decided to share his findings, that he would sell millions of electric vehicles in his home country and around the world. He implied that converting to electric cars was the moral equivalent of the abolition of human slavery and that it would usher in a new Industrial Revolution.

THE SALESMAN: Better Place founder and CEO Shai Agassi in 2009, when his startup was the toast of the worldPhoto by Dai Sugano, San Jose Mercury News, Mct, Newscom

This was science fiction, but Agassi presented it as fact, as if just by announcing his company he had already built it. It was “Shai math,” as his employees would come to call it. And it was intoxicating. The TED crowd gave Agassi a long standing ovation.

Agassi got virtually every meeting he ever asked for–with world leaders, celebrities, and CEOs of some of the world’s largest companies. The press anointed him the creator of a Next Big Thing. (Fast Company included Agassi on its 2009 Most Creative People in Business list.) Money from investors came fast and in big waves, roughly $900 million, and it seemed like it would never stop flowing. Until, suddenly, it did.

How did a company with so much going for it stumble so badly? ­Agassi’s grand vision gave Better Place life, but according to former employees, investors, and board members, that same grand vision also ultimately destroyed it. Entrepreneurs are frequently told not to drink their own Kool-Aid–which is to say, to remember that the stories they tell about how their products will save humanity are just that.

Privately, they are cautioned to focus on the small things; to make more money than they lose; to cut costs when needed; and, when necessary, to pivot to a more promising business. The caution seems especially important in a culture that increasingly celebrates startups, threatening to confuse their mythmaking with reality. Agassi made great Kool-Aid and then drank it all himself.

“Everything we needed to go right went wrong,” says one former employee. “Every cost on our spreadsheet wound up being double, every time factor took twice as long.” There was profligacy, marketing problems, hiring problems, problems with every conceivable part of the business. There was questionable oversight by the company’s board of directors. There was bad luck. And there was hubris.
“There was nothing normal about Better Place,” says Pross. “It was spectacular. Shai always said, ‘If we go down, we’ll make a lot of noise.'”

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Agassi’s startup lived fast and died young, and left almost nothing behind beyond the car that Pross and I are sitting in. Better Place sold fewer than 1,500 vehicles. Its swap stations, located next to gas stations and near highway on-ramps, closed last year. Their once-gleaming white walls, inspired by Apple’s design, are increasingly caked in dirt.

Better Place is a tragicomic case study of the limits of innovation, the difficulties of getting consumers to embrace new technology, and the perils of believing your own bullshit. What follows is the story of how that happened: a step-by-step guide to the most spectacularly failed technology startup of the 21st century.

Better Place’s battery-swapping stations were projected to cost no more than $500,000 each; they cost $2 million. They’re now shut down.

Shai Agassi was born in 1968, the year after his native Israel’s Six-Day War, and grew up in suburban Tel Aviv in relative privilege. His father, Reuven, an Iraqi-Israeli engineer, was a distinguished military officer–rising to the rank of colonel in the Israel Defense Forces–and later a telecom executive. Shai was at least as ambitious as his dad, learning how to program with punch cards as a 7-year-old in the mid-1970s, and then enrolling in Israel’s prestigious Technion university at age 15. After serving his mandatory military service, he launched a series of small-enterprise software companies with his dad. In 1995, Agassi moved to the Bay Area as part of a consulting assignment with Apple. The Apple manager killed his project, though Agassi would come to see this as the first of many signs of his own technical acumen. “You may have heard of the technology my team recommended,” Agassi wrote on LinkedIn last year. “It was called the Internet.”

Agassi’s particular genius was in selling new products. “The confidence he has in what he’s telling you is incredible,” says Joe Paluska, who served as Better Place’s chief marketing officer and is now the global chair of technology at the PR giant Edelman. Agassi stayed in Silicon Valley, ­developing a product that allowed large companies to create internal web portals. HP, Universal Studios, and Wells Fargo would become clients, and in 2001, SAP acquired the startup, called TopTier, for $400 million in cash.

Agassi, then 32, quickly became one of SAP’s young guns. He assumed the role of head of global product development from the company’s cofounder Hasso Plattner, overseeing a team of 10,000 engineers and settling easily into the role of jet-setting corporate executive. “He was this young hotshot,” says a former confidant. “He was going around telling everyone he was going to be CEO.”

In 2005, Agassi’s hotshot status got a boost thanks to an invite to join the World Economic Forum‘s under-40 group, Young Global Leaders. This is where he first got interested in alternative energy, and he plunged into researching new forms of transportation with Andrey Zarur, a fellow young-man-of-Davos who was at the time CEO of BioProcessors, a venture-backed biotech company. The men worked nights, weekends, and on transcontinental flights, casting a very wide net. “Shai said, ‘Let’s focus on cars, and let’s focus on Israel,'” Zarur recalls. “We looked at things that would make you laugh. Air cars, slot cars on electric rails, everything.”

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After 18 months of work, Agassi and Zarur had a draft of a white paper, titled “Transforming Global Transportation,” that would quickly become famous, at least on the conference circuit. The paper is both detailed and, like much of Agassi’s career before and since, ridiculously over-the-top. It compares the duo’s vision, to, among other things, Thomas Edison’s lightbulb, James Watt’s steam engine, Henry Ford’s Model T, John F. Kennedy’s Apollo program, and the Internet. “Every social transformation requires … the bravery of Churchill, the vision of JFK, the determination of Reagan, the rare ability to galvanize a country or the world to take the right step for a greater cause,” Agassi and Zarur wrote. “We are standing on the verge of such an event.”

At that moment, the electric-car industry consisted almost solely of Elon Musk‘s Tesla Roadster–a two-seater sports car that started at $100,000, making it a novelty product for the likes of the Google cofounders Larry Page and Sergey Brin. Agassi wanted to sell modest family cars that would be inexpensive for the average commuter. At minimum, these cars would be able to handle at least 30 miles of commuting per day, with the option to quickly refuel for longer trips rather than having to wait overnight for a charge. The plan was to persuade world leaders in a handful of countries to create tax incentives and generous subsidies for electric cars. Because of Israel’s tense relationship with its oil-producing neighbors and Agassi’s ties to his home country, the land of milk and honey held special appeal as a starting place.

The white paper that birthed Better Place compares its idea to the invention of the lightbulb, the steam engine, the Model T, and the Internet.

Before leaving SAP, hiring any employees, or apparently taking a single meeting with a potential partner, Agassi went public with his idea. In December 2006, he gave a presentation in Washington, D.C., at the Brookings Institution’s annual Saban Forum to an audience that included, among others, former President Bill Clinton and former Israeli Prime Minister Shimon Peres. The heavyweights loved Agassi’s idea. In a series of conversations that Agassi would later recount, Clinton suggested he consider giving the car away for free; Peres urged him to start a company. “A few days later,” Agassi would tell Fortune, “I quit my job at SAP.” This may have been an early instance of Shai math; Agassi actually resigned on March 28, 2007, his departure coinciding with Hasso Plattner’s decision to name one of Agassi’s reported rivals deputy CEO.

The Saban Forum ignited people’s imaginations. Agassi conducted dozens of meetings in Israel with government officials over the following months. Then in early 2007, at the World Economic Forum in Davos, Switzerland, Peres brokered a meeting for Agassi with Carlos Ghosn, CEO of Nissan and Renault. At the time, Ghosn wanted to leapfrog ­Toyota’s dominance in hybrid vehicles by going electric. The two hit it off, ­according to an account of the meeting in the 2009 book Start-up Nation, and a tentative partnership was struck. Ghosn suggested that they might build 50,000 cars a year; Peres suggested twice that.

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It seems likely that Ghosn and Peres were simply spitballing. After all, 100,000 cars in Israel would be half of the new-car market, in a country where the top car brand, Hyundai, has only 15% market share. Tesla Motors, at the time the only significant electric-car manufacturer, had taken reservations for only a few hundred Roadsters. But Agassi seemed to take it seriously, telling Time the following year that Israel would eliminate new sales of gasoline cars by 2015. At TED in February 2009, he suggested that the Renault cars would enter the market in 2011, “in mass volume–mass volume being 100,000 cars.”

Agassi never actually said Better Place would be selling 100,000 cars at launch, but he left observers with that impression. In September 2009, when Agassi finalized his deal with Ghosn­–who declined to comment for this story–Better Place formally committed to order 100,000 Renault cars between 2011 and 2016 for sale in Israel and Denmark. That’s wildly aggressive but not wholly delusional, and it let Agassi keep his magic number of 100,000 as a talking point. He would often tell the story of an encounter he had at the Frankfurt Motor Show after the announcement. “Wait, did you say you’d sell 100 cars or 1,000?” an attendee asked. Agassi smiled and said, “No, it’s 100,000.”

The number let Agassi reinforce Better Place’s wide-eyed optimism as a crucial selling point: He dreamed big while others sold toys. “That was the difference between us and the rest,” says Ziva Patir, an early employee. “They created city cars”–tiny subcompacts like Daimler’s Smart electric vehicle. “We wanted to get rid of oil.”

One of Agassi’s first investors was Michael Granoff, a politically minded venture capitalist who’d come to see electric cars as a solution to ­Israel’s continuing struggles with terrorism. Granoff, who would later join Better Place full time, handling investor relations and policy advocacy, introduced Agassi to Idan Ofer, then chairman of Israel Corp., a formerly state-owned holding company controlled by his family since 1999. The Ofers are controversial in Israel–a clan of pseudo-oligarchs who in the wake of the country’s liberalization of its once socialist economy, bought a stake in a government-owned shipping company for what some considered a low price. (Spokesmen for Ofer and Israel Corp. declined to comment for this story.)

Agassi and Granoff met Ofer in his office in the spring of 2007. The pitch lasted an hour or so. Agassi hunched over Ofer’s desk as he spoke, staring intently. He explained that Better Place would follow the model of the cell-phone industry–giving the hardware (in this case, a car) to consumers at a subsidized price and making money by selling subscriptions to a network of charging spots. He suggested that Better Place could be the world’s first trillion-dollar company. Ofer was polite, but he didn’t seem particularly interested. “I remember ­being certain that nothing would come of it,” Granoff recalls.

Stephen Colbert, right, to Agassi: “Let’s cut to the chase here: Will this car get me laid?” Nope.

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Agassi’s central thesis–that people wanted to buy car service the way they buy phone service–was flawed. “Nobody loves their wireless carrier,” says a Better Place designer. “They love their iPhone.”

At the end of the meeting, Ofer asked if he could have a copy of Agassi’s white paper and then walked the two men to the elevators. As Agassi and Ofer shook hands to say goodbye, Ofer leaned in and said in a low voice that Israel Corp. was in. “Put me down for a hundred,” he said. As in, $100 million. Agassi’s charisma had carried the day.

The deal would get even bigger in the coming months. Ofer added $30 million from his personal fortune. Granoff’s fund, Maniv Energy Capital, joined the venture firm ­VantagePoint and Morgan Stanley in a $200 million financing round. It was, as Agassi would often brag, one of the largest seed rounds in history.

Agassi celebrated the investment with a press conference that ­October. A team of publicists from Hill+Knowlton, the A-list PR firm, organized a lavish event at New York’s Essex House on Central Park South. Publicists were brought in from Israel to manage the Hebrew-speaking reporters, and a branding consultancy created a 3-D animation that showed cars pulling into a swap station and being charged in parking spots. “I didn’t know why we were launching so early,” says an investor who attended the event. At the time, the company had just a handful of employees. “The whole thing was weird.”

Three months later, Agassi did it again, hosting a second launch event in Israel, during which he told reporters that Better Place’s cars would be priced “roughly half that of the gasoline model today,” despite the fact that Better Place and Renault had yet to agree on pricing.

Agassi had effectively committed to a business model before he had even settled on a name. (At the time, the startup was called Project ­Better Place; Agassi would formally shorten it in 2008.) “Shai is a friend and an amazing guy,” says Gadi Amit, founder of ­NewDealDesign, whose firm designed Better Place’s charge spots. “One of his flaws is that he tends to overrationalize things and he misses cultural and human connections.” Amit points out that Agassi’s central thesis–that people wanted to buy car service the way they buy phone service–was flawed. “Nobody loves their wireless carrier,” Amit says. “They love their iPhone.”

A reasonable argument can be made that the enormous investment round led by Ofer was actually the seed of many of Better Place’s problems. “If Shai had raised $50 million instead of $200 million, it would have forced us to focus,” says Patir, who joined Better Place in early 2008 and served as VP of policy. Instead, Agassi had the money to think about anything, and anywhere, he wanted.

Employees called Better Place the highlight of their careers. “It was a beautiful dream to dream; people got hooked,” says one. “It was only later that you’d see the redundancy, the arrogance.”

Though Better Place at the time was only set up in Israel, Agassi ­already had global plans. “If the government of Poland created a new policy for electric vehicles, I had to make sure they created a policy for battery exchange,” says Patir, who managed a 10-person team.

That a senior executive was required to lobby Polish lawmakers on behalf of a revenue-free startup that didn’t yet do business in Poland might sound ridiculous. It was just the beginning. Agassi hired separate groups of managers in Israel and the United States–as well as in Denmark and Australia, where the company was planning to expand. The Danish and Australian enterprises were nominally independent from Better Place’s global organization, partially raising their own funding from such local partners as DONG ­Energy, Denmark’s giant utility.

Demonstration projects were planned in China, Japan, and Hawaii. This convoluted structure was reflected in the R&D organization led by a former SAP colleague, Barak Hershkovitz, who created the Oscar navigation system. The R&D team was based in Israel, but reported to Agassi in Palo Alto. The corporate structure proved so complex that Agassi hired a team of management experts in Palo Alto, led by a former Boston Consulting Group veteran, to keep the whole thing straight. “Better Place was never a startup,” says Shelly Silverstein, an early human-­resources employee. “It was built from the ­beginning as a conglomerate.”

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Better Place also paid above market. “Everyone wanted to work for us,” says one Israel-based executive. “Normally when you have this kind of company”–meaning a ­mission-based startup–“you don’t have to pay the highest wages. But we did.”

“You don’t see the wasted money when you’re in the middle of it,” Silverstein says. She, along with nearly everyone I met who once worked at Better Place, told me that her time there was the highlight of her career. “People were motivated by the vision: It was green, it was sustainable, and it was a little bit Zionist. It was a ­beautiful dream to dream; people got hooked. It was only later that you’d see the redundancy, the arrogance,” she says.

The one group of people Agassi seemed in no hurry to hire were actual managers with car-industry or infrastructure-building expertise. “We had no automotive experts,” explains one person familiar with the inner workings of the company. “Nobody who’d done a car in their life.”

Agassi’s head of automobile partnerships, Sidney Goodman–the man in charge of making sure that Renault built cars with batteries that could be easily swapped–was a former SAP business-development executive who’d served in the army with Agassi. (Goodman declined to comment for this article.) The guy in charge of building the battery-switching stations was a relatively green SAP account man, who by all accounts had no experience working on an energy project or a real-world construction project. But he had one credential no one else could boast: He was Agassi’s baby brother, Tal.

“There were two objectives in the white paper: to eliminate range anxiety and to deliver cars cheaply,” says Zarur, Agassi’s coauthor on “Transforming Global Transportation,” and, eventually, a Better Place board member. “In hindsight, we deviated from that mission. And all the bad blood and the backstabbing and whatever else was the result of that.”

In August 2008, Agassi appeared on the cover of the September issue of Wired magazine. Inside, the writer Daniel Roth described a meeting in which Agassi and his senior team–which included his brother, sister, and father–batted around ideas about how the company’s charge spots would work. They landed on the notion of using a robotic arm to plug in the car. “This is ‘think different,'” Agassi said, quoting the Apple slogan. “In 2008, we put the cable in the unit, in 2010 we use an arm, in 2012, there’s a smart arm that connects automatically. For the home unit, the users get a pull cable for free, or they pay $500 and they get autoconnect. It’ll cost $250 to build, and we’ll sell it for $500.”

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This little scene, presented as evidence of Agassi’s quirky brand of genius, was, in fact, pretty much totally insane. Even today, a basic wall-mounted charger with a cable sells for $700; the kind of robotic arm Agassi proposed, if it could have even been built, would probably have added thousands of dollars to the cost. (The idea of a robotic arm was, not surprisingly, quickly abandoned.)

Agassi indulged similar flights of fancy for Wired’s benefit. He shared with Roth a text message he sent to a carmaker about his plans to sell cars in Denmark: “I’ll be offering $20,000 cars in a market where you’re selling $60,000 cars. How many have you planned to sell in 2011 in Denmark? Because I recommend you take them off your plan.”

Leave aside for a minute that Agassi was publicly insulting a company with which he might one day need to partner. Look instead at the numbers: Electric cars were nowhere near as cheap as Agassi was claiming. His deal with Renault would require Better Place to pay close to $32,000 for every car and battery that was delivered. Even if Renault had offered its car at a substantial discount, it’s hard to discern how Agassi arrived at that $20,000 figure–and even harder to understand why it was taken seriously. The car would ultimately retail for $37,000 in Denmark, not including the cost of the battery; in Israel the after-tax price would be roughly $35,000, plus $12,000 for the first four years of access to Better Place’s charging and swap-station infrastructure.

I asked former executives and employees whether this discrepancy was a result of Agassi being out of touch with reality. The answer, in this case, was no. Agassi privately conceded to Better Place executives that the Renault deal was a bad one, but he was attempting to play a game of poker with the entire auto industry. “What Shai had in mind was that once we get a second car company, we could renegotiate with Renault,” says someone who was privy to pricing discussions. Better Place’s second car deal, the thinking went, would force Ghosn to come back to the table begging for new terms. “Because Shai’s an optimist, he was willing to sign anything Renault put in front of him. He didn’t think the price was an issue; it was an interim number.”

Unfortunately, many of the traits that made Agassi a great futurist made him a terrible negotiator. Carmakers, especially German ones like Daimler and BMW, tend to be conservative, and Agassi’s attempts to force them to adopt Better Place’s model caused them to recoil. “Shai correctly wanted to create a situation where the automakers would move quickly to electric,” says Amit Yudan, Better Place’s Austria-based business development manager. “The carmakers are used to a totally different ecosystem. Somebody from another industry trying to treat them as an equal partner is not in their DNA.” Another insider puts it more bluntly: “If we hadn’t been such assholes, BMW would have agreed to do a swappable-battery car,” he says. “Instead, they gave us the finger. [Agassi] pulled the same shit with ­Mercedes.”

Perhaps Agassi’s most promising lead was with General Motors, which had recently em­braced the idea of electric vehicles. Michael Granoff, the investor who had introduced Agassi to Idan Ofer, managed to score a meeting at the Renaissance Center in Detroit in 2008 for Agassi and his top car executive, Sidney Goodman, with a group of GM executives. The GM employees were skeptical, especially of Agassi’s projections for the uptake of electric vehicles. “It took the Toyota Prius 15 years to get to 1.5% market share in the U.S., and the Prius is a hit,” says someone who represented GM in the meeting. “You have to have a very compelling value proposition to get people to sign up. They’d started with ideology.”

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A more immediate problem was the fact that the Chevy Volt, which was nearing its production date, would not be compatible with Better Place’s battery-switching infrastructure. The Volt featured a T-shaped battery, meaning that it couldn’t easily be swapped out by Better Place’s planned service stations.

But GM had a counterproposal. Would Better Place consider managing a network of charge spots for the Volt? It likely wouldn’t be a profitable business­–Volt was designed to have a backup gasoline engine, after all–but it might kindle a relationship. “I thought: Let’s just do it,” Granoff recalls. “It’ll be fantastic, and we’ll move them toward our model.” Agassi dismissed the idea out of hand. “You’ll never build this,” he said of the Volt. “It’s a stupid car. How are you going to sell your $40,000 car against my free car?”

A free car? Granoff panicked. This was not part of the plan. The idea of a free car had been one that Agassi and other Better Place executives had toyed with as a thought experiment. If battery prices continued to fall … if electric car production ramped up … eventually … perhaps … maybe … possibly … a company could give consumers a free electric car, charging $500 a month for ­access to the battery and charging network in the same way that wireless carriers gave away phones and made up the cost by charging for usage.

A free car was a notion you take for a spin on a Davos afternoon. It wasn’t an idea that was ready for the Renaissance Center. Agassi’s decision to float it during the meeting, says Granoff, was “a complete absurdity.”

The GM executives were nonplussed. “If it’s free, why don’t you just swap the car instead of the battery?” one asked.

“That’s a stupid question,” Agassi said, infuriated.

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As they walked out, Agassi told Granoff, “The next meeting we have, it’ll be at our headquarters and we’ll have a bigger market cap.”

Agassi’s self-confidence was in some sense understandable. In 2008, clean tech was considered to be the hottest investment opportunity in the world, Better Place was one of the new ­sector’s stars, and GM and the rest of the old economy seemed on the brink of collapse. That October, as the United States searched for answers amid both the financial meltdown and the presidential campaign, Agassi delivered a speech in which he offered to build the 44th president a Better Place network across the U.S. for a cool $100 billion. Two months later, while the incoming Obama administration debated how to handle a flailing auto industry, The New York Times‘ Thomas Friedman devoted a column to lauding Agassi, saying, “What I find exciting about Better Place is that it is building a car company off the new industrial platform of the 21st century, not the one from the 20th–the exact same way that Steve Jobs did to overturn the music business.” He implied that the government would be better off giving any money earmarked for saving Detroit’s auto industry to Better Place.

“We spent $60 million to build something that TomTom sells for $29.95,” says a former board member of the Better Place navigation system. “We thought we could do everything better.”

Agassi had long seen himself as a Steve Jobs–like figure; now the most prominent writer at The New York Times had decreed it so. The failure of GM, and the public reaction to it, “made him think he was a prophet,” says someone who was close to Agassi at the time.

The U.S. government did not take Friedman’s advice. In mid-2009, GM filed for bankruptcy, selling itself to the U.S. government in a $50 billion bailout. The Department of Energy did ­offer loan guarantees to several ambitious clean-tech startups, including Tesla Motors, but it declined to give Better Place any of the funds earmarked in the economic stimulus package for electric-vehicle infrastructure. The government didn’t discover flaws that other investors missed. Rather, Better Place had yet to partner with a carmaker whose vehicles were available in the United States, hurting its candidacy. (Discussions would resume with the resurrected GM, but they never led to a firm deal.)

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The perceived snub from the U.S. government seemed to rattle Agassi. Although he continued to successfully woo private investors–in January 2010, he announced a second investment round of $350 million, which gave the company a $1.25 billion valuation–his behavior became erratic.

Agassi went on vacation to Israel in the summer of 2009, disappearing from the Palo Alto office for much of the rest of the year. Then, in February 2010, Agassi emailed his Palo Alto staff to inform them that he’d decided to relocate to Israel. He also began telling people that he had separated from his wife and now had a girlfriend, Tami Chotoveli, the owner of a luxury watch company who had apparently been moonlighting as his personal coach. Several former employees say that Agassi brought Chotoveli to meetings and hired some of her friends to top positions. Better Place had hardly been a meritocracy before Agassi’s return to Israel, but now, says one former employee, “There was a watering down of the management team and a level of cronyism.” (Chotoveli declined to comment.)

Meanwhile, Agassi had a falling out with his VP of operations Aliza Peleg, the non-family member at the company to whom he’d seemed closest. “Nobody could manage Shai, really, but Aliza had been an incredible counterpoint and a sounding board,” says a senior executive. In mid-2010, Agassi forced Peleg out after accusing her of communicating behind Agassi’s back with Alan Salzman, a board member from one of Better Place’s investors, VantagePoint. (­Salzman declined to comment; Peleg did not respond to interview requests.)

“That was around the time he started to go nuts,” says a person with knowledge of the machinations of the board. Employees left behind in Palo Alto were horrified by Agassi’s behavior. Efforts to diagnose him were something of a secret parlor game among certain disgruntled workers. One told me that he later sought out excerpts from the DSM, the psychiatric manual, in an effort to categorize Agassi’s state. He decided that his absentee boss suffered from a narcissistic personality disorder. “Every box was ticked,” he says. The DSM’s clinical definition of narcissism includes “has a grandiose sense of self-importance,” “is preoccupied with fantasies of unlimited success,” and “shows arrogant, haughty behaviors or attitudes.”

The sudden move to Israel was in some ways logical for the business–Better Place had an annual $7 million travel budget, according to a former employee, and Israel would be its launch market–but it alienated many senior ­employees. More than half of the original Better Place leadership team–“the grown-ups,” as they were known–would eventually leave in the wake of Agassi’s exodus. This included CFO Charles Stonehill and the general counsel, David Kennedy, who both left in 2011. Neither man would be immediately replaced. (Stonehill and Kennedy did not return requests for comment.) It would take Better Place, a company with hundreds of millions of dollars in capital and plans to file for an IPO, nearly two years to appoint a new CFO. Peleg was never replaced.

Meanwhile, Agassi brought his own brand of divisiveness to the Tel Aviv offices. At the global headquarters, which was on a different floor than the Israeli headquarters, he built himself a glass cube of an office. “The luxury in the global office was amazing,” says Shelly Silverstein, the HR exec. “It was petty, but they had stuff we didn’t have. We only had cookies from Israel; they had Nature Valley granola bars and Coke Zero. It didn’t feel like one company.” A rumor circulated that Agassi had spent more than 5,000 Israeli ­shekels–$1,500–on a coat rack.

To the outside world, Better Place still preened in 2010. The company opened a visitor center in a Tel Aviv industrial park that February. Built inside a giant converted oil-storage tank, it was a poetic expression of Agassi’s ambition to replace fossil fuels with something clean and modern. The attraction, which was being dismantled when I visited earlier this year, featured a mile-long track where customers could test-drive a prototype car and a theater with 30 vintage car seats, a giant wall-size screen, and a hologram machine that projected a life-size Shai Agassi. One last, slightly mystifying feature: a futuristic rotunda, not unlike the war room in Dr. Strangelove, in which customers stood in a circle and played with personal touch screens that showed the planned locations of Better Place’s switch stations.

The launch of the Better Place car was still two years off, but the visitors’ center, which cost the company at least $5 million to build, was nonetheless quite a draw. More than 100,000 people went on tours–grade-school classes, tourists, and dozens of U.S. congressmen, senators, and governors. Some 30,000 sat down with a Better Place salesperson to pick a color and fill out a form stating their intent to purchase a car whose price had not yet been announced.

Unlike Tesla, though, which had asked early customers to secure their spot with a deposit of $5,000 or more, Better Place’s reservations were not binding. Except, perhaps, in Agassi’s mind. In a 2011 interview with the tech news site GigaOm (whose founder, Om Malik, is now Fast Company‘s technology columnist), Agassi publicly claimed that inventory was sold out for nearly two years. Employees told me that Agassi made similar boasts on internal conference calls. “Shai was giving these talks with wrong numbers,” says someone who worked in the company’s marketing division in Israel. “We knew they were too optimistic, but it was very hard to convince him.”

In reality, Agassi’s projections were falling far short. Agassi had assumed that the car would cost roughly half the price of a typical gasoline car and would have a range of at least 100 miles. Instead, batteries were delivered with a range of closer to 80 miles, and the terms with ­Renault meant he was selling an unsexy family car for about the same price as a nice sedan like the Mazda3 or the Toyota Corolla. (Not to mention that customers were asked to spend an additional $3,000 or so a year to rent the battery and pay for the use of charging and swap stations.) “There was a bit of Shai math going on there,” says Evan Thornley, CEO of Better Place’s Australian subsidiary. “If there were 100,000 cars on the road tomorrow, his economics would have been right. But the time frames he talked about for selling cars were crackers.”

Meanwhile, the cost to build out Better Place’s charging network had ballooned. The original spreadsheets that Agassi and the Palo Alto founding team had assembled called for swap stations to cost approximately $500,000 each. So, building 40 stations in Israel would cost about $20 million, while 20 in Denmark could be built for about $10 million. Ultimately, however, each switch station cost at least $2 million, meaning that Better Place would have to sell many more cars and driving subscriptions to pay for its pricey infrastructure. “Because it was so expensive, we needed more customers,” says Patir, the former VP of policy. Given this, Agassi’s bullishness could charitably be seen as a way to stoke the company’s momentum into sales.

That would be very charitable indeed. Better Place could have also drastically cut costs and conserved cash. Sales and support could have been outsourced–or, given that there was no product, simply shut down. It could have bought off-the-shelf charging stations from GE instead of designing proprietary ones. The program to develop the Oscar navigational system could have been scaled down. “We spent $60 million to build something that TomTom sells for $29.95,” says a former board member. “We were building our own charge spots and call centers. We thought we could do everything better.”

By the spring of 2011, just five quarters after closing $350 million in financing, Agassi had to start fundraising again. The goal had been to raise another $350 million at a $2.75 billion valuation. But all Agassi could get was $200 million at a $2.25 billion valuation. The November 2011 press release cited GE and UBS as investors, but people involved with the round say their contributions were minimal. Almost all of the money came from existing shareholders. “The general public was like, ‘Wow, this is a rocket ship,'” says one. “But the bloom was off the rose, and the financial community knew it.”

By the time Better Place would finally have a car for sale, in January 2012, the company’s daily burn rate–that is, the amount of money it was losing each day on operating expenses like sales, R&D, salaries, and payments to ­suppliers–exceeded $500,000.

Better Place sold just 100 cars in its first two months, mostly to employees. “The press and the public were expecting a low-priced car,” says a marketing executive. Agassi promised to ramp up sales once the cars’ technical kinks had been worked out. But the reality was a PR disaster.

In June, with sales still slow and cash running out, the board of directors convened for its regular meeting. At one point, Agassi was asked to leave the room and Zarur, Agassi’s original collaborator, proposed that the board assume ­responsibility for hiring an operations chief and a CFO. According to people who were present, the board agreed, and Ofer, the largest individual shareholder and the company’s chairman, promised to inform Agassi. “By that point it was clear in our minds that this was not sustainable,” says an insider. “The only way we could keep Shai in the company was if he became a figurehead. They were taking the company away from him.”

Shortly thereafter, Agassi spent the day at Ofer’s house and managed to talk him out of it. “Idan went wobbly,” says a senior executive. “Shai said, ‘Over my dead body,'” says a board member. “Ultimately it was over the dead body of the company.” When Alan Salzman, who had been Agassi’s loudest critic on the board, learned what had happened, he resigned in disgust.

Ofer went on ­vacation following his visit with Agassi, sailing the Mediterranean on his new yacht, Better Place, reportedly a $10 million, 165-foot sloop. Agassi, meanwhile, ­accused Zarur of betraying him. Sometime later, Zarur’s biography on the Better Place website was rewritten to downgrade his contributions to the company.

On September 28, 2012, Agassi emailed the board, asking for a “safety net,” a bridge loan that would allow the company to make payroll and pay suppliers. For months, he’d been negotiating to raise even more money. There was a deal for about $56 million in debt from the ­European Union’s investment bank, most of which was earmarked for Denmark, and there was talk of a possible $50 million project in California and a $100 million deal to build a network in the Netherlands. But the money hadn’t come through, and without additional funding from current investors, the company would be insolvent in a matter of weeks.

Agassi had finally overplayed his hand. ­Israel Corp., though controlled by Ofer, had been a public company since 1982, meaning that Better Place’s books were audited as part of Israel Corp.’s regular fiscal reporting. So Better Place’s dismal sales and massive losses were now a matter of public record. Insiders say that Ofer, who had been the company’s most passionate defender–often to the point of willful ­blindness–became angry. “Idan realized he was being manipulated, he realized he’d been made a fool of for five years,” one says. “Shai went from being the person he loved most to the guy he hated most.”

Days later, Ofer proposed that Agassi step down as CEO and become chairman. Agassi said no; Ofer would have to fire him outright. So Ofer did. “An electric car with a switchable battery is the future,” Agassi wrote in an email to the company on October 2, 2012, announcing his departure. “I will think of you every morning, as I enter my electric car, start it, and smile as I see Oscar come up to greet me.” Agassi continued to drive his Better Place car but never returned to the offices.

In what was perceived as either an act of blind faith or perhaps a face-saving move, Ofer led one final $100 million financing round and turned over the tiller of this sinking ship to Thornley, the Australian CEO. “The financial management was in such a mess,” Thornley says. “We had suffered from a lack of management discipline. There’d been a lack of accountability.”

As the new CEO, Thornley saw the full effect of that lack of accountability. Agassi, with the board’s consent, had allowed many of the company’s suppliers to insert high minimum orders and cancellation penalties into its contracts. This created more than $100 million of off-book liabilities. Canceling the billing-system contract alone–Agassi had purchased the software from Amdocs, which primarily serves large telcos with millions of customers–would cost the company $80 million.

These runaway expenses meant that Better Place would have to quickly sell as many as 30,000 cars in Israel just to break even. But by November 2012, the company had sold just 500 cars there. “There wasn’t a snowball’s chance in hell we could have gotten to positive cash flow in Israel,” Thornley says. “The only path that existed would have been to raise more capital and expand to other countries.” By the time the books closed on 2012, Better Place would record an operating loss of $386 million. The board fired Thornley in January 2013.

Dan Cohen, a close associate of Ofer’s, took over. He shut down operations in Australia and announced that the company would only focus on Israel and Denmark. (Upon hearing this news, Daniel Roth, now a LinkedIn executive, sardonically acknowledged on Twitter that his Wired story, “The Future of the Electric Car,” should be amended to add, “But Probably Not.”) A few hundred more cars were sold–mostly on corporate leases, and mostly because Better Place guaranteed to buy back the cars after the leases were over.

Those guarantees would be worthless by May, when Better Place declared bankruptcy. The company and its affiliates in Australia and Denmark had raised almost $1 billion. They had only put around 1,400 or so electric cars on the road by the time the court-ordered liquidation started that spring.

Some former employees and customers blame Better Place’s failure on the board of directors, and especially Idan Ofer. According to that argument, the board could have allowed the car more time on the market, could have made more of an effort to enforce sensible financial controls, and could have fired Agassi at least a year earlier.

It seems likely that after the bankruptcy is settled, investors, including Ofer, will have lost every penny they put in. Agassi’s 12% stake in the company is now worthless; his patent for a battery-exchange station will wind up being owned by someone else; and the company he poured so much of his life into is dead. Meanwhile, those customers who purchased cars are left with a hard lesson in what it means to be an early adopter. “We didn’t know how bad the state of the company was when we bought the car–we just really believed in the vision,” says Brian Blum, a Jerusalem-based freelance writer and father of three who bought a Better Place car in August 2012. “It’s a real shame, because the car drives so well. I try to be positive.”

I first contacted Agassi about this story nearly a year ago, in June of 2013. We corresponded many times in the months that followed, as I tried to convince him to go on the record–via Facebook, email, phone calls, and eventually during an in-person meeting at a seaside café outside Tel Aviv. The answer was always the same. Agassi steadfastly refused to explain his tenure at Better Place or to confirm or deny allegations of erratic behavior and poor management. “It’s a great story,” he wrote in his first Facebook message to me in June. “But I’m in no position to interview right now, for obvious reasons.” Shortly before press time, he agreed to respond to my reporting, but only in writing. In the end, he simply replied that “Shai Agassi declined to comment for this story.”

Agassi may see this dark time as a kind of wilderness period before he emerges again with another world-changing idea–like the one Steve Jobs went through after being fired by Apple in 1985. “I wouldn’t count Shai out,” says Saul Singer, coauthor of Start-Up Nation and a friend of ­Agassi’s. “I’m sure he’ll find a way to reinvent ­himself–to try to find the next big thing. What’s funny is, he’ll be forced to do it lean–and that’s okay.”

Indeed, Agassi has not completely left the public stage: Last August he wrote a four-part, 8,000-word series on the future of cars for ­LinkedIn. In the posts, he argued, still dwelling perhaps in the realm of Shai math, that Detroit should offer a mass-market electric car for less than $10,000 and make up the money by creating a charging network. Much of the piece seems straight out of his original white paper, but Agassi didn’t mention his old company. It was as if the past seven years hadn’t happened.

Agassi isn’t the only person who feels that his idea will outlive the infamy of his startup folly. Many of his former employees, even those who have clearly come to despise their old boss, still treat that white paper by Agassi and Zarur as a near-sacred document. They believe that ­Agassi’s fundamental insight was world-­changing and will eventually come to pass. “In 10 years we probably could’ve gotten there,” says Thornley. “The tragedy of the company is that we were trying to accelerate the trend toward electrification and we may have retarded it.”

Maybe not. While Better Place was being sold for scraps, Tesla Motors, which pursued a strategy that Agassi had long derided as overly cautious and small-minded, delivered its 25,000th car. Perhaps more significantly, the company has added nearly 100 so-called supercharger stations in the U.S. and Europe since late 2012. The stations can deliver 170 miles’ worth of battery capacity in a half-hour charge. The networks look a bit like what Agassi long imagined.

Tesla’s Model S car, it turns out, has a swappable battery. Musk never seemed to put much stock in that technology, but he had the intellectual flexibility to allow that Agassi might have been right about a few things. In June 2013, just three weeks after Better Place’s bankruptcy filing, Musk hosted an event in which someone drove a Tesla onstage and a contraption below the stage swapped its battery in 90 seconds. The plan is to roll out a handful of battery-switch stations this year between Los Angeles and San Francisco. Customers will be able to choose between a free charge or a paid swap.

Tesla’s next task will be to build a gasoline-free mass-market car. The Model E, as it’s being called, will be a $35,000 family sedan. It is slated for a 2017 ­release, 10 years after Agassi’s launch. Tesla’s success–and that of any other electric-car company–will likely depend on how well they absorb the lessons of Better Place’s failure.

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A version of this article appeared in the May 2014 issue of Fast Company magazine.